Final answer:
A limited liability company (LLC) is best thought of as a cross between a partnership and a corporation. It provides limited liability protection to its owners while offering the benefits of a partnership in terms of management and tax flexibility.
Step-by-step explanation:
A limited liability company (LLC) is best thought of as a cross between a partnership and a corporation. Similar to a corporation, an LLC provides limited liability protection to its owners, meaning their personal assets are protected if the company fails or incurs debts. Like a partnership, an LLC offers flexibility in management and taxation, allowing for pass-through taxation where profits and losses flow through to the owners' personal tax returns.
For example, let's say two friends want to start a business together, but they want to limit their personal liability in case the business fails. They could form an LLC, which would protect their personal assets while offering the benefits of a partnership in terms of management and tax flexibility.